Dividend stripping

Has the norms changed on dividend stripping (section 94 (7) of the Income-Tax Act) as dividend income is now added to an individuals gross income?

As per Budget 2020, since DDT (Dividend Distribution Tax) is abolished, dividend would now be taxable in the hands of the shareholder. However, no change has been made to Sec 94(7).
As per our opinion, since the shareholder would be paying tax on dividend, he would also be allowed to claim the entire capital loss instead of capital loss to the extent of dividend amount in the earlier provision.
However, no such clarification is issued by the Income Tax Department
For any further queries, you can write to us on [email protected]

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I pay income tax and not a senior citizen. Do i need to pay taxes on dividends as per my tax slab despite the dividends being less than 5000? If yes how to adjust the TDS already paid in Tax Filing?

Dividend Income is now a taxable income after abolishment of DDT (Dividend Distribution Tax) under Budget 2020. FY 2020-21 onwards, Dividend is a taxable income. Thus, you must pay tax as per slab rates even if the dividend is less than INR 5000. Further, the TDS already paid would be considered as tax paid. It would be reduced from the Total Tax Liability. If there is an excess tax, you need to pay the Self Assessment Tax, If the TDS exceeds Tax Liability, you can claim the refund of the excess amount after filing Income Tax Return.

For any further queries, write to us on [email protected]

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@Quicko

After budget 2020, dividend on shares are made taxable in hands of taxpayer.

Suppose taxpayer is in slab 30%, is there any scope of dividend stripping?

Does it add any financial value by setting off capital gains with dividend stripping loss?

Hi @ashok_bansal

There is no scope of dividend stripping with respect to taxation since the dividends are now taxable.

You can have the benefit of set off of losses which is anyways allowed as per the rules.

Hope this helps!